« Just say no to the myth of shareholder democracy »
Yvan Allaire | IGOPP« It is tiresome indeed to debate with people who never respond to your fundamental arguments. Instead, they wrap themselves in the spurious argument of “shareholder democracy”. If corporations were to apply the principles of citizen democracy, tourists-shareholders would not have the right to vote and newcomers to shareholding would have to wait a good period of time before acquiring the right to vote.
They basically claim that boards are incompetent, biased, conflicted and, thus, should not be left to decide what is in the best interest of the company. They rehash the quaint notion that management is, ipso facto, against the takeover of their company because of inherent conflicts of interest; yet, because of the changes in compensation system for executives and board members, the concern has become that management and boards may be too receptive to a takeover offer that may not be in the interest of the corporation and its stakeholders. The potential conflict of interest has switched side.
They might go so far as to claim that the Supreme Court of Canada has not clearly stated in BCE v. debenture holders (2008) that:
[38] The fiduciary duty of the directors to the corporation is a broad, contextual concept. It is not confined to short-term profit or share value. Where the corporation is an ongoing concern, it looks to the long-term interests of the corporation.
[40] In considering what is in the best interests of the corporation, directors may look to the interests of, inter alia, shareholders, employees, creditors, consumers, governments and the environment to inform their decisions.
Courts should give appropriate deference to the business judgment of directors who take into account these ancillary interests, as reflected by the business judgment rule… It reflects the reality that directors, who are mandated under s. 102(1) of the CBCA to manage the corporation’s business and affairs, are often better suited to determine what is in the best interests of the corporation. »
